By TODD BISHOP, SEATTLE POST-INTELLIGENCER REPORTER

Updated 10:00 pm, Wednesday, July 27, 2005

Secret meetings, confidential messages and alleged exchanges with Bill Gates were brought out as ammunition yesterday in the legal battle over a former Microsoft executive's departure for search rival Google.

Although the case revolves around one executive, Kai-Fu Lee, it is providing a rare glimpse into what's fast becoming one of the industry's biggest rivalries. Filings by Microsoft and Google underscore how seriously the software giant takes its struggle against the search leader.

In a declaration filed with the court, Lee recalled a conversation in which, he said, Gates warned him that Microsoft Chief Executive Steve Ballmer would sue if Lee went to Google, becoming the highest-ranking Microsoft employee to do so.

"We need to do this to stop Google," Lee's declaration quoted Gates as telling him.

King County Superior Court Judge Steven Gonzalez heard arguments yesterday afternoon on Microsoft's request for a temporary restraining order that would block Lee from continuing in his new position at Google. Gonzalez said he would rule on the request this afternoon.

In legal filings and yesterday's court hearing, Microsoft cited internal documents and meetings in an effort to show that Lee has the type of inside knowledge and experience that makes his new position with Google a violation of his Microsoft employment contract.

Google disputes Microsoft's allegations, saying that Lee's new position doesn't compete with his past work for Microsoft. Google alleges that Microsoft has an ulterior motive in filing the suit -- to discourage others from defecting.

In its opposition to Microsoft's motion, Google called Microsoft's lawsuit "a charade."

"In a shocking display of hubris, Microsoft has rushed into court claiming the entire field of search as its own," the company said in its court filing. "In truth, Kai-Fu Lee's work for Microsoft had only the most tangential connection to search and no connection whatsoever to Google's work in this space."

But Microsoft says it is simply doing what's appropriate.

"We filed this suit to ensure that Dr. Lee does not violate the agreement that he made with us to honor the confidentiality of our intellectual property and trade secrets," said Microsoft spokeswoman Stacy Drake.

Microsoft's motion cites a "highly confidential" March briefing, attended only by executives, entitled "The Google Challenge." Microsoft says Lee attended that meeting, which the company calls one example of his access to "highly competitive plans, including plans to compete with Google."

In court yesterday, Jeffrey Johnson, a lawyer with Preston Gates & Ellis, representing Microsoft, referred to other pieces of evidence, including an e-mail allegedly received by Lee about Microsoft's hiring strategy in China and notes of a 2004 meeting in which Microsoft says Lee and Gates discussed Microsoft's search strategy and Google.

Johnson also cited a draft of Lee's employment contract with Google. Microsoft says Google anticipated a potential conflict with his Microsoft employment contract by agreeing to continue paying Lee for any period in which he is enjoined from working at Google.

Johnson asked Judge Gonzalez to accept those documents under seal, citing their confidential nature. The Seattle Post-Intelligencer opposed that request in court and asked Gonzalez to make the documents public record. The paper plans to reiterate its request in a court filing today.

Michael Droke, a lawyer with Dorsey & Whitney, which is representing Google, pointed to the fact that Lee left the confidential Microsoft materials behind as evidence that the executive had no intention of disclosing Microsoft secrets to his new employer.

"I think the court should look carefully at the motive in this case," Droke said, saying it was "obvious" that Microsoft was seeking to "chill the mobility of other employees."

Lee attended the hearing, along with his family, but declined to comment afterward. Microsoft said in a filing that it paid Lee well to work for the company and keep its secrets -- more than $3 million in total compensation since 2000.

Google acknowledged that Lee, at one point, had "oversight responsibility" for the MSN Search team at Microsoft. However, Google said in court filings, that was during 2001 and 2002, when Microsoft was licensing its search technology from Inktomi.

Microsoft launched its own MSN Search technology earlier this year, but its service remains in third place in market share behind Google and Yahoo!.

According to newspaper reports from China, Lee was in Beijing earlier this week laying the groundwork for his new Google position. Google announced last week that it hired Lee as its new China president, to lead a new research and development operation there. Microsoft promptly filed its suit.

Google filed its own lawsuit over the matter in California last week. In its opposition to Microsoft's motion for a restraining order, the company said Lee "is not a search expert" but focuses instead on such areas as speech recognition.

Lee founded Microsoft's China research lab, but the filing says he has had "only limited involvement in Microsoft's China operations" since 2000.

"There's simply no threat of any harm," said Droke.

But Johnson, the lawyer for Microsoft, pointed to evidence that included the notes of the conversation between Gates and Lee. "He's talking about search, he's talking about Google, and he's talking to Bill Gates," Johnson said, underscoring the company's contention that his new position conflicts with the clause that prevented him working in a directly competitive area.

In a statement yesterday, Google associate general counsel Nicole Wong accused Microsoft of "intimidation tactics" in filing the suit against Lee and Google.

"We're working on a great place for innovators to work, while Microsoft is focused on litigation and intimidation," Wong said in the statement.

Microsoft spokeswoman Drake disputed Google's allegation that Microsoft is using Lee as an example to prevent others from following his lead. "We are asking Dr. Lee to honor the agreement he made with us," Drake said.